There is no question that Sonic Corporation (SONC) has arguably the most distinct business model in the quick-serve restaurant industry. However, is this enough to validate an investment in the franchise?

After lowering its outlook for the fiscal year, from between $0.55 - $0.60 to $0.50 - $0.55 per share, Sonic announced on June 21, 2010 that its earnings for the third quarter were a disappointing $0.18 per share. This figure is lower than what analysts predicted by 1 to 4 cents per share, and even includes a 3 cent tax benefit. Without including special items, this marks a year over year decline of almost 40%.

Fast-food giant McDonald's (MCD) announced that its first-quarter net income rose to $1.09 billion, or $1 dollar per share from 87 cents per share a year ago. The eatery's quarterly sales increased to $5.61 billion, topping the consensus estimate for sales of $5.53 billion. Global sales increased 4.2%, which was topped by a 12% rise in operating profit in the United States.

These solid results were once again driven by its McCafe beverages, the Breakfast Dollar Menu, and Chicken McNuggets. In Europe, quarterly profit growth increased 23% and the Asia-Pacific, Middle East and Africa unit logged 27% growth. McDonald's is one of the few companies that has capitalized on the global recession. The company's value menu has helped McDonald's weather the financial storm, as tight-walleted consumers turn to the Dollar Menu to fill their bellies.

Across the U.S., from midtown Manhattan to suburban Des Moines, restaurants are starting -slowly but surely - to see signs of recovery. Market research firm NPD Group, which tracks sales at 47 restaurant chains, indicates that sales at restaurants at least one year old rose 1% in March on a year-over-year basis. It's a modest victory, but a victory nonetheless, as the industry emerges from 10 months of slowing sales.

Rollerskates: they give a new meaning to "getting a burger to go," doesn't they?

Carhops on roller skates are making a comeback as Sonic (SONC) forges ahead with plans to revive wheeled waitstaff at its drive in restaurants across the U.S. Sonic is planning a new TV ad campaign that will highlight this nostalgic feature of Sonic stores that many diners may have forgotten -- or that younger customers didn't even know existed -- in an effort to reconnect with consumers.

Though it's a bit later than fast-food rivals McDonald's (MCD) and Burger King (BKC), Arby's is at last rolling out a value menu of its own. The restaurant is adding more lower-priced items to its menu including a small roast beef sandwich, curly fries and a "jamocha" shake -- and operator Wendy's/Arby's Group (WEN) is backing them with an expensive new advertising campaign.

It's part of a big push by the higher priced fast-food joint to woo back cost-conscious customers who fled the pricier restaurant for cheaper rivals during the recession. Since Arby's ownership group Triarc bought the Wendy's name in 2008, it has seen its Arby's stores stuck in a steady downward spiral -- sped up by the recession.

But will this latest gambit help, or is Arby's a dying chain?

OpenTable Inc. (NASDAQ: OPEN) came into the world with a bang on Thursday, shooting from $20 a share to a peak of $33 before settling down for the week at $28.75. A 44% gain makes this the second strong initial public offering (IPO) for a venture-backed company, following the SolarWinds Inc. (NYSE: SWI) debut the day before.

Originally, OpenTable planned a price range of $12 to $14, which crept up to $16 to $18, and eventually to its final level of $20.

Among all the layoffs at tech companies and banks, layoffs at restaurants are barely a plink-plink-plink dropping in the unemployment bucket. Restaurant employees, after all, often work more than one job and variable hours, and turnover is extremely high. It's not one of those made-for-Hollywood scenes when restaurants lay off employees (with the conference room filled with HR consultants and stacks of separation agreements); the picture looks more like gradual reduction in hours until one day you're just not on the schedule. Or, one cocktail waitress at this location, a hostess at the other location, handing in their aprons and their time cards. Perhaps it's just that applicants for empty jobs never get a call back, no matter how awesome their experience.

The Wall Street Journal today evaluates a report that jobs at food service establishments have decreased for five months in a row, and says waiters and waitresses are earning less in tips. Once-darlings of Wall Street, Brinker International (NYSE: EAT)'s Chili's and Starbucks (NASDAQ: SBUX) have seen many outlets close. To blame: it's the economy, naturally, with patrons eating out less, downscaling to fast food for family nights out, ordering less expensive food, and reducing tips from 20%-plus to exactly 15%. Adding insult to injury is the half-of-minimum-wage pay that servers and bartenders are paid in many states: it's been $2.13 an hour since I graduated high school (I can still remember the ignomy when my $21 weekly paycheck from the little Lexington, Virginia pub where I worked in college bounced -- that's how you know your employer is struggling!).

These aren't good times to work in the restaurant industry, or invest in anything but the bare-bones-est of eating establishments.

McDonald's (NYSE: MCD) program to sell premium coffee is not going well. That would make some sense. Even Starbucks (NASDAQ: SBUX), the kings of expensive Java, is doing poorly.

According to The Wall Street Journal, "Management may have to defend its giant bet on lattes and cappuccinos, which they want to add at all McDonald's 14,000 U.S. restaurants by next year." The newspaper says that early sales figures for the new drinks are mediocre.

If McDonald's did pull back on its sales of high end coffee-based drinks, it would be the best news Starbucks has had in a couple of years. As US same-store sales growth rates at the chain have fallen, the company's stock has moved from over $40 to below $15. Getting some competition out of the market could be critical to Starbucks recovery.

But Starbucks is not likely to be so lucky. With its massive size and tremendous cash-flow, McDonald's can afford to stay in the premium coffee business for years without a meaningful impact on its earnings. It sells too many hamburgers to be hurt by a slow start in latte sales.

McDonald's can wait Starbucks out and hope that, as things get worse for the coffee company, customers will turn to Ronald McDonald more frequently.

Douglas A. McIntyre can be reached at 247wallst.com.

According to T.G.I. Friday's U.S. president, the restaurant industry is going through an unprecedented slump. According to The Wall Street Journal, "Across the U.S. casual-dining landscape, chains large and small are struggling to keep customers coming in and remain profitable, with cost-cutting, menu revamps, technology and other innovations ... On the one hand, their guests are increasingly demanding value. On the other, their costs -- from the price of a pound of butter to the hourly wages they pay their waitstaff -- are going up."

One way that they're doing that is by decreasing portion sizes to avoid price increases and, in a stroke of semantic brilliance that would make George Orwell proud: billing the smaller portions for the same amount of money as "health-conscious." Hey, if I wanna be healthy, I'll get a doggie bag!

I would probably stay away from restaurant stocks for now. The industry seems stuck in a quagmire with little relief in sight, and the shares of the best of breed players don't look cheap. It also seems to be an area that private equity firms haven't been diving into, which is probably indicative of something.

Shares of Cheesecake Factory Inc (NASDAQ: CAKE) fell more than 7% today after management lowered its second quarter earnings guidance, citing industry-wide softness and higher dairy costs. The company forecast second quarter revenue would increase 14.5% to 15.5% and quarterly margins would be down 1% year-over-year.

Earlier today, Bear Stearns downgraded shares of Cheesecake Factory to Peer Perform from Outperform on the news. Bear Stearns expected Cheesecake to show revenue growth of 16-17%, or 34c per share. CIBC World Markets followed suit and downgraded shares to Sector Perform from Outperform on the news.

Raymond James cut shares to Outperform from Strong Buy, expecting shares of the restaurant to trade lower in the near-term. The analyst still considered Cheesecake a good long-term buy, given the likelihood that dairy prices will retreat in time.

Earlier this month, Green Progress News reported that Chevron Corp. (NYSE: CVX) was teaming up with the city of Rialto, California, in the construction of a system to take the greasy waste water and sludge generated by restaurants and transform it into a usable energy source. The team is using the impending necessity of waste-water treatment facility expansion for Rialto to take advantage of construction expense outlays that would have been expected anyway.

Fats, oils, and grease that are routinely sent out as waste from restaurants, and that currently go directly to landfills will instead be deposited at the Chevron/Rialto facility, which shall be the recipient of the waste hauler's "tipping fees" also. Tipping fees are simply the haulers' cost for emptying their loads. Typically, all that restaurant waste, and the potential trapped within it, ferments in our landfills, creating methane gas, most of which ends up in our atmosphere unless it's burned off immediately. The Rialto/Chevron project will instead process these wastes utilizing an organic matter "digester," producing methane for conversion into hydrogen, which can then be used to generate electricity.

The financial angles on this project will present some noticeable impact both in expenditure and returns. It is estimated it shall cost a bit over $15 million to build the system and bring it to operational status. When completed, the project will become eligible for a $4.05 million rebate on the fuel-cell plant cost from California's Self-Generation Incentive Program. The balance of the costs will reportedly be recovered through energy cost savings, and there are no expected taxpayer costs. Additionally, the system will be utilizing a bit less than 1,000 kilowatts of generating capacity to provide baseload power, which should assist in keeping consumer electricity costs stable. Grace Vargas, Rialto's mayor, has stated: "It's a 'win' for multiple stakeholders -- our city taxpayers, restaurants, grease haulers, and the environment."

Yum! Brands Inc. (NYSE:YUM) KFC is having some fun at rival Wendy's International Inc.'s (NYSE:WEN) expense.

KFC's will be giving away samples of the Colonel's Crispy Strips on January 29 to celebrate the fact that Wendy's has removed Homestyle Chicken Strips from its menu, according to a press release from the Louisville-based company. This bit of corporate benevolance will be touted in an advertisement in USA Today. I'm sure the folks at Wendy's are hanging their heads in shame.

As McDonald's Corp.'s (NYSE:MCD) recent blowout quarter underscores, chicken is big business for the fast-food companies. Notice how Yum Brands is taking a shot at Wendy's and not the home of the golden arches.

Still, my advice to investors and consumers who are in need of fast-food chicken is to head over to their local Chick-fil-a. Not only is the chicken good, but so are the Waffle fries. The company, which claims it was first with the "nugget concept,: operates 1,280 restaurants in 37 states and Washington. D.C. Last year, its sales were $2 billion, up from $1 billion in 2000.

As expected, McDonald's Corp. (NYSE:MCD) posted strong fourth quarter results. The market, however, seemd to react to the company's annoucement that it plans to invest $1.9 billion this year on opening new stores and revamping existing ones. Investors always react negatively when a company says it plans to put money back into the business.

9:30 a.m. -- I log onto the site for the call which features a picture of a salad. I know they are big sellers but has anyone actually seen anyone at McDonald's order a salad. Maybe I go there at the wrong times. Then I quickly realize that I am there one hour too early. I immediately secure a cafeinated beverage to wake up.

11:30 a.m. -- The call actually is starting. It's a pity since I am digging the bouncy, upbeat jingles. Finally, a company knows how to program hold music. There are pop, hip-hop and Spanish language versions of the jingle. Darn, it's over

11:31 a.m. -- Usual disclosures.

11:35 a.m.-- CEO Jim Skiner. I am pleased to report that 2006 was an outstanding year for McDonald's., Our revenues reached record high. We returned 5 billion to shareholders. Total shareoholder return was 35 percent. "As I said, an outstanding year."

Plan includes financial discipline. Strategy is growing by not just getting bigger. This year, we plan to open 800 new restaurants. 200 US., 150 Europe, 375 Asia. Invest $1 billion in existing restaurants. Our committment is to return at least $10 billion to shareholders. Our plan to win will continue to be operational roadmap.

Continue to add new menu items at breakfast and in chicken sandwiches in US.

1137; IN china. our key growth market. We have the most menu choices amongst our menu set. The drive through is abssolutely critcal to our long-term development. We'll also market breakfast nationally.

.. Our system has never been more alligned. McDonald's is a system that succeeds because we are a franchising org., We are committed to right balance of franchises versus owners.

Matthew Paull, CFO

Clearly we've reached a point where customers and investors agree that McDonalds is better. HIghest operating margins since 2000. US margins were up 30 basis points. The US fourth quarter margin increasis is especially meangingful because there was profit sharing in the year earlier period.

11:41. I can assure you that G&A control is a high priority for the management team. Total shars acquired in 06 were 98 million.

Lookin. The headwinds created by our old compensatipn programs (options) aren't nearly as strong. The company is granting fewer options.

We expect future buybacks to yeiled a meaningful decline in share count because of fewer options.

IN each of our major market in which the legal market is conducive to ranchises., They want less than 30 percent tob ecompany owned. More franchises in U.K. and Canada.

Licensing,

Given our menu . Beef and Chicken are clearly the primarily drivers. The company sees beef down, Chicken up in US, both up in Europe.

"WE are determined to get better at being better at everything we do." Gosh that's vague.

11:47. UBS Congrats. Why do analysts do that? It's annoying. Asks questions about UK market.

Paull: We do see positive signs In Europe.

Goldman: Development license agreements. Timing of agreements? IS the proceeds included in the $5 bln returned to shareohlders

Paull: Have'n't figured out what to do with the proceeds. WE are very, very confident that we will get this done.

"We''re not going to get into specifrics"

Citi: Latin America., company units. Why more company stores in Latin America?

MCD: We had some litigation with our franchiesses .We are through all of that now. We are doing a lot better in Latin America. Our margins improved dramticaly down there.

BofA: Menu price increase going into 07? Competition for breakfast?

Skinner: Breakfast. We're the clear leader. WE are very very proud of our breakfast items. Our delivery at breakfast will continue to improve. WE are focussed on it.

CFO: We've tried to raise prices at slightly below food away from home . If you look at 07, food away from home index, 3.6, slightly ahead from 2006. Certain restaurant companies want to get ahead of minimum wage pressure

For the last four years, when we raised prices to recover prices. saw guest count rise, "speaks to power of brand."

Bear: Plans for Coffee in 2007? US Minimum wage increase, any cost pressure?

Skinner: We have a number of thing in test that include speciality coffees, premium burgers. Breakfast burritos. The coffee has done very, very well for us.We are looking at the potential for speciality coffee in 07, Obviously, we will continue to. There is always going to be some pressure when the minum wage increases., We are paying above the minimum wage now. We don't expect to have a huge pressure with this. MCD pays above minimum wage

Lehman: Debt level?

CFO: WE are about 8.5 bln at the year end. expect to stay there. the average cash balance in 096,

Wachovia: POS system. Improvements?

Skinner: Yes there have been improvements . We still have huge upside potential. We've improved on the accuracy and yet we are not there. WE won't be satisfied. We've made progress but we continue work hard on this. It's a journey not a destination.

CFO: AT the end of 06. POS was in 7,000 in US. Most weren't in US.

Oyster Capital: Extended hours?

CFO: We're very happy with extended hos in the US, Now its expanding to other geographies. We're very satisfied with the margins that we get. The strategy is starting to spread to Asia.

CIBC: How many countries have above 30 percent corporate program?

CFO: Not many are like UK and Canda. Franchising laws and China and Russia aren't there

DB: traffic pickup because of ecoli scare

CFO: Mcdonald's looked into this and found no effect.,

MS: Gift card activations?

Skinner: Had an uptick. Had more sales of giftcards this year. Don't record them until they are spent. We expect them to be better.

Paull: WE adopted this better not just bigger. Internally, we had doubts ourself. WE ar efairly convinced that it is right for us. The specifics. WE are basically goign to be putting our money where are mouth is.

Skinner: Right peoiple are in the right place.,

The anti-General Electric Company (NYSE:GE) camp must be quaking in their shoes. The perennial giant is set to comfortably leap above $40 per share...again. There are those of us who have seen this coming for quite some time. If you bought into GE a couple of months ago, this should come as a pleasant entry into the new year.

Several subtle moves by GE have spurred this new and invigorated growth, the most recent of which is the refinancing of Indiana-based Hacienda Restaurants by GE Capital Solutions, Franchise Finance division. The $7.6 million deal allowed Hacienda to buy finance warrants that were still outstanding from investors. This move places 100% control of the restaurant chain directly into the hands of its owners.

General Electric and Hitachi Ltd. (NYSE: HIT) have signed a letter of intent to enter into partnership in the development and resourcing of nuclear energy assets. This is a continuation of GE's push into energy conservation and non-petroleum based energy solutions. The two companies expect to exchange percentage ownership in their respective nuclear energy divisions in order to more efficiently exploit each of their existing nuclear programs. You can get a good look at Hitachi with this link.

A new breed of natural gas fired electric turbine is being installed in Romoland,California by General Electric to produce energy which will be marketed by Calpine Energy Services. This new generation turbine will generate energy to serve the needs of more than half a million homes. General Electric will own the Inland Empire Energy Center facility, while Calpine will manage the facility operations and market the output. The cooperative agreement between GE and Calpine calls for eventual ownership of the facility to be taken over by Calpine Energy Services.

If you're still not sure that GE is leading the pack, I suggest a tour of the General Electric website. It does a nice job of keeping investors up to date. I hope you'll get a feel for just how forward moving and well run a company it is. Watch the stock tickers, see the investors swoon. You just can't write these folks off the page.

Want to hold a small but interesting stock that is rather thinly followed by analysts? Try Texas Roadhouse, Inc. (NASDAQ: TXRH), a casual dining steakhouse that features in-house meat cutting. Pick your own steak and watch it being cooked just for you. All the home-made bread you can eat. Throw your peanut shells on the floor. Average meal price is $14.00. Texas Roadhouse currently has 250 restaurants in 43 states, with plans to open another two dozen before the end of 2006. In addition to steaks, the menu also features beef ribs, pork and chicken. Carnivores rule here.

Texas Roadhouse went public in 2004. The stock split 2:1 on September 26, 2005. Shares have slowed a bit since then. Senior management made a presentation on September 19, 2006 at Bank of America's 36th Annual Investment Conference in San Francisco. Highlights of the presentation are: $600 million in total revenues for 2006. Income from operations is forecast to exceed $55 million (I said it was a small company). Earnings per share should be in the 39-43 cents range. Average per restaurant sales volume for 2006 is forecast at $4 million. Sames stores sales growth is modest at 2-3%.

Currently, Texas Roadhouse serves dinner during the week, but expands to include lunch as well as dinner on weekends. Restaurant stocks are notoriously fickle investment vehicles, but Texas Roadhouse compares favorably with its closest competitors, Outback Steakhouse and TGI Fridays.

TXRH closed at $13.53 on September 19, 2006, up 3 cents per share. 798,041 shares traded hands.

[Photo The Jamoker]